In October 2015, former B.C. finance minister Mike de Jong wrote to the B.C. Lottery Corp. and warned that for B.C. casinos “large and suspicious transactions remain prevalent,” Postmedia has learned.

At that time, de Jong also directed BCLC board chair Bud Smith to “enhance customer due diligence to mitigate the risk of money laundering” in B.C. casinos, according to information cited in a May 2017 government letter to BCLC CEO Jim Lightbody.

The direction from de Jong in 2015 came after B.C. casino operators reported about $177 million in suspicious cash entering their casinos in 2014, government documents show.

“Despite the introduction and promotion of non-cash alternatives in gaming facilities through earlier phases of the anti-money laundering strategy; I am advised that large and suspicious cash transactions remain prevalent. This situation must be addressed,” de Jong’s October 1, 2015 letter to BCLC states.

The information — revealed in documents obtained by Postmedia after a freedom of information request — raises questions about why serious internal concerns about the laundering of proceeds of crime in B.C. casinos were only released last week by the B.C. government, and whether a dangerous problem was allowed to fester for too long.

On Friday, Postmedia reported that Attorney General David Eby released a damaging confidential audit of BCLC. Based on the audit, Eby ordered an independent review of BCLC’s money laundering controls.

The audit by accounting firm MNP LLP was ordered by B.C.’s gaming enforcement branch in 2015, and focused mainly on un-sourced cash flooding into River Rock Casino in Richmond. The report said police intelligence indicated that VIP high-rollers, mainly from China, were provided massive wads of cash by criminals in B.C., and that casino staff allowed the VIPs to purchase gambling chips without proper reviews of the fund sources.

One of MNP’s main recommendations was that casinos in B.C. refuse to hand out chips for large cash deposits, until the sources of funds could be verified. This vetting could be difficult though, MNP’s report says, since the majority of high-risk casino clients at River Rock are “Chinese nationals.”

The idea of barring cash until clients are properly vetted was suggested to BCLC in July 2016, according to documents obtained by Postmedia.

“My letter … included the suggestion that BCLC should consider not accepting funds where the source of the funds cannot be determined or verified,” says a subsequent letter from enforcement branch assistant deputy minister John Mazure. “The letter also provided examples of how such a policy could be implemented.”

Mazure’s May 2017 letter to Lightbody also acknowledges that the casino overseer has increased efforts to crack down on money laundering since 2015.

Based on data provided by B.C. casino operators, there was $177 million in suspicious cash transactions in 2014, and the figure was reduced to $132 million in 2015 and to $72 million in 2016, Mazure’s letter states.

“This is a significant reduction and reflects the actions taken to date by BCLC,” Mazure wrote. “However, $72 million is still a significant amount of suspicious cash … Further action is still required to mitigate the risk presented by the proceeds of crime entering B.C. gaming facilities.”

In an interview Monday with Postmedia, de Jong said that he took action on the money laundering concerns he was advised of in 2015, but he didn’t release MNP’s audit to the public because he was advised not to.

Former finance minister Mike de Jong says the Liberal government launched the Joint Illegal Gaming Investigation Team in April 2016 in response to money laundering concerns.Jason Payne /
PNG

“The latter part of 2015 we started to get information highlighting concerns around money laundering, (and MNP’s report) was part of that,” de Jong said. “The advice at the time was don’t release the report, which could be used by money launderers to adjust their practices.”

De Jong said that his government’s response to the money laundering concerns was to start the Joint Illegal Gaming Investigation Team in April 2016.

“I think there’s obviously more to be done and there’s going to need to be ongoing vigilance,” he said.

B.C. Lottery Corp. was asked by Postmedia Monday why it has not immediately implemented cash-vetting suggestions from the enforcement branch and MNP’s recommendation that “casinos refuse unsourced cash deposits exceeding a certain dollar threshold until the source can be determined and validated.”

BCLC did not respond by deadline Monday to several questions, including whether staffing would be increased at River Rock to combat suspicious cash.

“We want to ensure you receive the most accurate information,” a BCLC spokeswoman said.

Explaining the reasons for its audit of BCLC, MNP noted that the enforcement branch “compiled a document which identified approximately $13.5 million in $20 bills being accepted in River Rock in July 2015.”

Investigations and interviews showed that some VIPs have been allowed to purchase gambling chips at River Rock with more than $500,000 in small bills at a single time. And casino staff are accepting these wads of cash even though there is “no known source of funds.”

MNP’s audit says the issue of B.C. casinos, especially River Rock, “accepting large volumes of cash has been a growing problem in the province for a number of years … BCLC is accountable to the province for revenue … Service providers (are) focusing on revenue.”

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